Frequently asked questions

On this page you will find answers to questions that may come up when dealing with your debts. The questions have been grouped into different headings to help you find what that you are looking for more quickly. The answers to the questions on this page contain links to more detailed information to help you.

Bailiffs

Can a debt collection agency or bailiff force entry to my premises?

Debt collection agencies are not the same as bailiffs. Debt collection agencies cannot take your belongings and have no rights to force entry to your property at any stage. They usually become involved in collecting debts after you have missed payments on credit debts such as loans, credit cards and store cards. They act before court action has been taken against you. Bailiffs are often used by creditors after court action has been taken. In most cases, they should not force entry to your home unless they have been in peacefully before and taken the correct steps to put your belongings under the control of the law.

What goods are bailiffs not allowed to take from me?

Bailiffs cannot take goods that belong to someone who doesn't owe the debt. They shouldn’t take household items that are necessary for your basic domestic needs. Also, most bailiffs cannot take goods or vehicles that you need to use personally in your work or business up to a set total value.

When can bailiffs visit my home?

Bailiffs should not usually visit you outside the hours of 6am to 9pm. There are exceptions to this, for example, if you run a business which trades outside these hours. As a matter of good practice, bailiffs should not visit you on Sundays, bank holidays, Good Friday or Christmas Day.

How can I complain about a bailiff?

The procedure you need to follow to complain about a bailiff's actions depends upon the type of bailiff you are dealing with. You usually need to put your complaint in writing to the bailiff's firm first. If you are not happy with their response, you may be able to escalate your complaint to a trade association or court. You can also complain to the creditor because the bailiffs are acting as their agents. If you are not happy with the creditor's response, you may be able to take your complaint to an ombudsman. There are good practice guidelines that all bailiffs should follow. You can explain where the bailiffs have not met these standards in your complaint.

My debt has gone up since it was passed to the bailiff - what can I do?

Ask the bailiffs for a written breakdown of what they say you owe. Bailiffs should provide you with a breakdown of the fees they have charged. Under the law, bailiffs can usually only add on certain fees and charges for the work they do. These charges depend upon the type of bailiff you are dealing with. If the bailiffs’ fees are higher than the law says they can charge, or if the bailiffs refuse to give you a breakdown, you can complain.

How can I complain about a debt collection agency?

Every debt collection agency (DCA) should hold a consumer credit licence to do their job. This means that they must follow the Financial Conduct Authority's rules and guidance for debt collection set out in their Consumer Credit sourcebook (CONC). If the DCA you are dealing with breaks these rules or guidelines, you can complain. You can complain to the Financial Conduct Authority (FCA), but the FCA cannot deal with your individual case. However, they can gather evidence about how the DCA behaves and may take this into account when deciding whether to renew their licence. Most DCAs are a member of a trade association, which is usually the Credit Services Association (CSA). The trade association will usually have a set of guidelines about how they expect their members to behave. If you complain to the DCA and are not happy with their response, you can complain to the trade association.

Court action

Can interest be added to a county-court judgment?

If a creditor has got a county-court judgment against you, they may be able to add extra interest to what you owe. For some types of debt, the law allows interest to be added onto county-court judgments separately from the terms and conditions of the agreement. This is known as ‘statutory interest’ and it runs at a standard rate, currently 8%. For some debts, there is a clause in the agreement which allows further interest to be added onto the debt after the creditor has got a county-court judgment. This is known as ‘contractual interest’.

Once a creditor gets a county-court judgment (CCJ) against me, what further action can they take?

Once they have a CCJ, your creditor may apply for an order which requires you to attend court and give information about your circumstances. This is not done very often, but is possible if the creditor wants to gather more information before deciding what type of further action to take against you. The creditor can apply for a charging order against your home (if it is mortgaged), even if you are up to date with the payments that the court ordered you to make. A charging order secures the debt against your home. Once a creditor has a county-court judgment (CCJ) against you, they may also apply for an order to freeze money in your bank account, a warrant allowing bailiffs to visit your property to try to take your goods or an order allowing them to take regular deductions from your wages at source. However, the creditor can only take these types of action if you have not paid the county-court judgment as the court ordered.

Can I go to prison for having a county-court judgment?

It is not a criminal offence to have a county-court judgment against you. You cannot be sent to prison, even if you do not pay the county-court judgment as the court ordered. However, if your creditor applies for an order requiring you to attend court to give information about your circumstances or applies for an order to make regular deductions from your wages at source and you do not respond to the court paperwork properly, you could be at risk of being imprisoned for contempt of court. This is rare, and if you follow the correct procedures there is no risk of this happening.

I have heard that my debt might be 'unenforceable'. What does this mean?

When you take out an agreement, the creditor must follow certain rules and procedures set out in the law. These include how the agreement should be drawn up and what should be included in the paperwork you sign. If these rules are not followed properly, you may have a defence to any court action the creditor takes against you. This means that although you still owe the money, the creditor may not be able to get the money back by taking legal action. If the law gives you a complete defence to court action by the creditor, the debt is known as 'unenforceable'. In certain situations, a debt may be enforceable with ‘leave of the court. This means that if your defence is proven, the court can still allow the creditor’s claim to be successful if they decide this is fair. Contact us for advice.

If I do a debt-management plan to deal with my debts, can creditors still take court action against me?

A debt-management plan is an informal arrangement with your creditors where a debt-management company negotiates reduced offers of repayment on your behalf. It is not legally binding. This means that creditors do not have to accept the offers that are made or freeze interest and charges. However, the debt-management company will do their best to get the creditors to agree to the offers made. If a creditor keeps refusing the offer made to them, they could make a claim through the county court to get their money back. This means you would get a court order called a county-court judgment. This would confirm how much you owe and tell you how it should be paid back.

I have got a hearing for a liability order in the magistrates' court. What does this mean and do I have to go?

If you are behind with your council tax, and have not come to an arrangement to pay, the council will apply for a liability order. This is an order issued by the magistrates' court that gives the council the right to use certain ways of trying to make you pay. There is usually no need to attend the liability order hearing. This is because the magistrates' court cannot deal with any disputes you might have about the debt or agree a repayment plan with you. If you have received notice of a hearing, or that a liability order has already been made, get advice as soon as possible.

Credit and credit files

How will a county-court judgment (CCJ) affect my credit rating?

A county-court judgment (CCJ) will be recorded on your credit reference file for a period of six years. After that, it will drop off, even if you still owe money under the judgment. If you pay off the CCJ in full before the six years is up, you can apply for a certificate of satisfaction for a small fee so that your credit reference file can be marked to show that you have paid in full. Whilst the CCJ is on your credit file, it will make it more difficult for you to get further credit.

How can I find out which banks are connected?

If you cannot afford to pay your creditors in full and you are considering your options to deal with them, it is very important to get your income paid into an account which is separate from all your debts. Some banks are connected, so it is important to open an account which is not connected in any way to any of the creditors you owe money to.

Will I be able to open a new bank account if I have got debts?

Yes – most banks and building societies offer what is called a ‘basic bank account’. These accounts are useful because your credit score does not usually matter. This means you should still be able to get a basic bank account even if you have lots of debt or a county-court judgment, and in some cases, if you are bankrupt. A basic bank account is a simple type of account that lets you pay money in and out, but doesn’t usually offer things like an overdraft or a cheque book.

My bank keeps taking money from my account to pay my debts to them - what should I do?

If you owe money to your bank, for example for a credit card, loan or overdraft, in some circumstances your bank is allowed to take money from your account to make repayments on these debts. It is called the 'right of set-off'. To make sure your income or savings are protected, open a basic account with a different bank as soon as possible, and arrange to have your wages, benefits or other income paid into this account. If the bank has already taken money from your account, you may be able to ask them to refund it as they should leave you with enough to live on.

How will missed payments, debt-management plans, county-court judgments, bankruptcy, individual voluntary arrangements and debt relief orders affect my credit file?

As a general rule, information about your credit history stays on your file for 6 years. This can make it more difficult and expensive to get further credit. A debt management plan is likely to be recorded for as long as the plan lasts, even if this is more than six years.

Is there a credit black list?

No, there is no such thing as a credit black list. Each lender takes into account different information when deciding whether to lend, so being turned down by one doesn't mean you will be turned down by all. The credit reference agencies cannot offer an opinion to lenders on your 'creditworthiness' - they only pass on factual information about your borrowing history. For more information see our fact sheet: credit referencing.

How can I improve my credit rating?

Make sure your credit file is up to date by making sure you are on the electoral register. You can apply to go on the electoral register at any time of the year by contacting your local council. Lenders often use credit scoring to consider whether to give you credit. Each time you apply for credit a search by the lender is recorded on your credit file. Too many searches could reduce your credit score. Getting copies of your credit file regularly means you should be able to quickly spot any information that is incorrect. You can ask for incorrect information to be removed or corrected by contacting the credit reference agency.

Can I get a consolidation loan to deal with my debts?

National Debtline cannot give financial advice. However, we can suggest some helpful things for you to think about before taking out further credit to deal with existing debts. If you take out more credit, such as a consolidation loan, you risk getting deeper into debt in the long run. It is important to complete a budget sheet. This will help you to see the money you have coming in and going out. Contact us for help, information and advice. We can explain to you the advantages and disadvantages of taking out further credit, as well as the alternative options. This will help you to make the right decision.

If a debt is owed jointly by more than one person, does the creditor have to agree to split the debt between them equally?

Unless stated otherwise in the agreement, each debtor is 'jointly and severally liable'. This means that the creditor can pursue each person for the whole debt. Once the debt is paid, the creditor should stop asking for money. If one person has paid more of the debt than the other, they could pursue the other person for the extra amount. However, this is likely to require legal advice.

Someone I live with has debts. Will this affect me?

Usually, a creditor can only ask you to pay a debt if you signed the original agreement with someone else, or if you signed to say you would be a guarantor for them. Being a guarantor means that you agree to pay the debt if the person named on the agreement falls behind with payments. Debts are not 'registered' against a particular address. Instead, they are linked to the person who owes the money and anyone that they have a joint financial connection with. This means that if you live with someone who has debts, but you have no financial connections with them such as joint bank accounts or joint loans, your credit reference file should not be affected. You can request a copy of your credit reference file to see what information it contains.

Dealing with creditors

Can a debt collection agency or bailiff force entry to my premises?

Debt collection agencies are not the same as bailiffs. Debt collection agencies cannot take your belongings and have no rights to force entry to your property at any stage. They usually become involved in collecting debts after you have missed payments on credit debts such as loans, credit cards and store cards. They act before court action has been taken against you. Bailiffs are often used by creditors after court action has been taken. In most cases, they cannot force entry to your home unless they have been in peacefully before and taken the correct steps to put your belongings under the control of the law.

Can I have a bank account if I go bankrupt?

Many banks have their own rules about who can have the different types of accounts they offer. Some do not allow someone who is bankrupt to have an account with them, even 'basic' accounts that do not offer any credit. However, there are certain accounts that you can open, even if you are bankrupt.

If I go bankrupt, will I lose my home?

When you go bankrupt, any valuable property that you own (your assets) may be sold to raise money to pay your creditors. If you own your home, and the property is worth more than the amount of any outstanding mortgage and secured loans, your home has 'equity' in it. Depending upon the amount of equity, it is possible that your home may be sold. This is usually a last resort. There is normally an opportunity for you to negotiate an alternative, such as a third party buying out your share. If you rent your home, your tenancy could be affected if you go bankrupt. Check your tenancy agreement and your landlord's policy. If you are a reliable tenant and pay your rent on time, your landlord may not take action to end your tenancy, even if there is a clause in it which allows them to do this.

What is 'discharge' from bankruptcy?

If you go bankrupt, you will be under certain restrictions for up to one year. This is your bankruptcy period. During this time, the person in charge of your bankruptcy (known as the official receiver or trustee) may investigate your situation and deal with any assets you have. After this time, your liability for the debts included in your bankruptcy is written off. This is known as 'discharge'.

If I go bankrupt, will my job be affected?

Some types of job may be affected by bankruptcy. Always check your contract of employment to see if bankruptcy is mentioned. You can also ask your staff welfare officer or trade union if you are uncertain. If you belong to a professional body which does not allow you to be bankrupt, you could be struck off. For example, this may affect solicitors and accountants.

How much does it cost to go bankrupt?

To go bankrupt, you have to pay a deposit of £550 and an adjudicator's fee of £130. The adjudicator works for the Insolvency Service. They deal with your bankruptcy application.

If I go bankrupt, will I have to pay anything towards my debts?

When you go bankrupt, the person in charge of your bankruptcy (the 'official receiver') will look at your income and outgoings to see if you have any money left over after your essential spending. If you have any spare money, you may be asked to pay something to your debts for three years. This is known as an 'income payments arrangement' (IPA). If you do not agree to make the payments, the official receiver can apply to court for an 'income payments order' (IPO). If your circumstances change, it is possible to vary the terms of the IPA or IPO.

What is the difference between bankruptcy and an individual voluntary arrangement (IVA)?

Both bankruptcy and an IVA may be options available to you if you can't pay your debts as they fall due. They are sometimes known as insolvency options. An IVA is a legally binding arrangement to pay back part of what you owe over a set period (usually five years). Bankruptcy is an official order which ends your liability for debts and can result in any assets you own being sold to raise money to pay your creditors. There are a number of effects of entering into an IVA. However, an IVA avoids some of the effects of being made bankrupt. For example, if you own your own home and it is worth more than the outstanding mortgage and any secured loans, it may not be treated as an asset in an IVA. However, in bankruptcy it will be treated as an asset and there is a greater risk of losing your home.

What is a debt relief order?

A debt relief order (DRO) is a cheaper alternative to bankruptcy, which stops most creditors from taking further action against you. It lasts for 12 months, after which the debts included in the DRO are written off. A DRO may be able to help you if you do not own your home, have few assets and little available income to pay your creditors.

I am interested in a debt relief order. Can you help?

You can only apply for a debt relief order (DRO) through a special type of adviser called an 'approved intermediary'. If you meet the basic criteria for a debt relief order, you may be able to apply through National Debtline. The first step is to speak to one of our advisers on 0808 808 4000 who can go through a budget sheet with you. Please have information about your income, outgoings and debts ready when you call. The adviser will check that you meet the basic criteria for a DRO. If you do, we can send you out a DRO application pack. Once you sign and return this, you case will be looked at by one of our approved intermediaries. You have to meet strict criteria to be eligible for a DRO and it is important to consider other options to deal with your debts aswell.

Which debts cannot be included in a debt relief order?

Some debts do not count towards the £15,000 debt relief order (DRO) limit, although you still have to list them in the DRO application. This means you are still liable to pay these debts in full. You cannot include magistrates’ court fines, maintenance and Child Support Agency (CSA) payments and arrears, student loans and budgeting loans and crisis loans. This is not a complete list of the debts you cannot include.

How long does a debt relief order last?

12 months. However, if the official receiver finds that you have not been honest and open about your finances either before or during the DRO, or they decide that you have behaved irresponsibly, they may ask you to agree to a ‘debt relief restrictions undertaking’. If you refuse, they may apply to the court for a ‘debt relief restrictions order’. This means that you will still have certain restrictions on you for between 2 and 15 years after the date of the DRO.

Will a debt relief order affect my credit rating?

Credit reference agencies keep information on DROs for six years. It may be difficult to get further credit during this time. Even after six years, your ability to get a mortgage could be affected. This is because some lenders may ask if you have ever been made bankrupt or had a DRO.

I am receiving debt collection letters addressed to someone else for a debt I do not owe. What should I do?

If debt collection letters are sent to your address in someone else's name, this does not make you liable for the debt. Also, the debts should not affect your credit reference file as long as you do not have any joint financial connections (such as joint bank accounts or joint loans) with the person named on the envelope. You can return this type of letter to the sender with a note on the envelope stating 'addressee not known'. If you have previously lived with the person named on the envelope and the letter relates to essential household bills such as council tax, gas or electricity, the rules are more complicated. Contact us for advice.

A debt collection agency (DCA) has threatened to take court action against me. What can I do?

Even if a DCA threatens to take court action against you, it doesn't always mean that they will do this. Keep negotiating with them in writing using our guidelines and your budget summary. Keep making the payments that you have offered, even if they do not accept them. If they do take court action against you, you do not usually have to go to court. You will receive a claim form which you can fill in with an offer of payment that you can afford. If the creditor refuses your offer, the court has the final decision on what you should pay. If you keep to the payments that the court orders, the creditor has less ways to take further action against you.

What is an insolvency practitioner?

An insolvency practitioner is someone who is authorised to act on behalf of an individual, partnership or limited company in insolvency matters. For example, an individual voluntary arrangement (IVA) is a type of insolvency where an individual enters into a formal agreement with their creditors to pay back part of what they owe over a set period. An IVA has to be set up and managed by an IP.

What is an individual voluntary arrangement (IVA)?

An individual voluntary arrangement (IVA) is a formal agreement, between you and your creditors, to pay back part of what you owe over a set period (usually five years). An IVA may be suitable if you have at least £15,000 total debt, at least two different creditors and you are able to pay back at least 10p in every £1 to your creditors. There may be some cases where an IVA is suitable even if you don't meet these criteria. An IVA is set up and managed by an insolvency practitioner. There are a number of advantages and disadvantages of IVAs. Consider these carefully before choosing this option.

If I do an individual voluntary arrangement (IVA), will I lose my home?

Not necessarily. There is an IVA protocol, which is a set of guidelines about how an IVA should work. Unless your circumstances are unusual, you should be able to do an IVA which follows the IVA protocol. Under the protocol, there is protection for your home. If there is enough equity in your property, you may have to release some of this by re-mortgaging. However, if you are unable to do this, you will not be forced to sell your home. Instead, you would have to make 12 months extra payments into the IVA. The protocol also contains further safeguards. However, not all insolvency practitioners (IPs) follow the IVA protocol. If you do an IVA with an IP that does not follow the protocol, your house may be at risk of being sold. In certain circumstances, National Debtline can refer you on to an IP that follows the IVA protocol.

I have already repaid the amount I borrowed. Why do I still owe money on my debt?

When you take out a credit agreement, the total amount you owe to the lender includes the money that you originally borrowed and interest and charges that the lender adds on for borrowing the money. There are different ways to get information about what you still owe. One simple way is to write to the creditor and ask for a full breakdown. Different pieces of law give you rights to get information about what you owe. You can use these if your creditor does not give you the information you want.

Can National Debtline contact my creditors for me?

National Debtline is a self-help organisation. This means that we can give you information and advice that helps you to choose the best way to deal with your debts. We cannot write letters on your behalf or phone your creditors for you. However, we provide further help and guidance on how you can deal with your creditors, including sample letters for you to use when writing to them. You can call our free phone helpline as many times as you need so we can give you on-going advice. In certain circumstances, we may be able to refer you on to another organisation that can help you set up different types of arrangements to deal with your debts.

I haven't got a written agreement and didn't sign anything - am I still liable for the debt?

The rules that should be followed and the paperwork you are entitled to depend upon the type of agreement you took out. For example, if you took out the agreement over the internet, the creditor may be allowed to send you certain documents by email. For bank overdrafts, you may not have a separate written agreement, although information about your overdraft should be explained in the terms and conditions of your bank account. For other debts such as loans, credit cards and store cards, there should be a written agreement that meets the requirements laid down in the law. If the creditor did not follow the correct procedures when you took the agreement out, you may have a defence to any court action they take to get their money back. Contact us for advice.

What is a time order?

A time order is an order made by the county court which gives you more time to pay an agreement that is regulated by the Consumer Credit Act. Usually, a time order will only be made if you are experiencing temporary financial difficulty and if it is fair to both you and the creditor. A time order is not usually the first option you would consider to deal with your debts. You can only apply for a time order once you have fallen behind on payments and the correct notice has been sent to you. There are different procedures for applying for a time order depending on the type of debt you owe and the stage of collection it is at. Contact us for advice.

I have been contacted by a company saying that they can get my debts written off. What should I do?

There are lots of companies who say they can get your debts written off for you by claiming that your agreements have not been drawn up properly. Be careful. It is not easy to challenge a credit agreement and many are drawn up correctly. Many of these firms charge large up-front fees and you may not be able to get your money back if they are unsuccessful. If you are worried about your debts and struggling to repay them, using one of these companies is unlikely to be your best option. Get free and independent advice from us first. We can tell you if there may be genuine grounds to challenge your agreements and also give you advice on all your options to deal with your debts.

My spouse has debts. If they die, can my home be taken away from me?

If your home is mortgaged, there are two types of ownership status you could have: 'joint tenants' and 'tenants in common'. In certain situations, your spouse's share of the property could be used to pay off any debts they left behind. The procedures that your spouse's creditors would have to follow to do this depend on the ownership status you have. This is a complicated area and you may need legal advice on your rights. If you rent your home, may be able to take over the tenancy in your sole name. Joint tenants automatically take over a tenancy. Otherwise you may be able to ‘succeed’ or inherit the tenancy, if you were living there when your spouse died. The time you have to have lived with the tenant is different depending upon the type of tenancy.

I am interested in a debt-management plan. Can you help?

If you are struggling to pay debts such as loans, credit cards, catalogues and store cards, and you want someone to negotiate reduced repayments on your behalf, a debt management plan may be a suitable option. In certain circumstances, National Debtline can refer you onto a debt management company that will not charge you any fees. For us to refer you, you need to be able to pay at least £5 a month to each of your debts, and to repay all of your debts within 10 years.

If I do a debt-management plan to deal with my debts, can creditors still add interest to what I owe?

A debt-management plan is an informal arrangement with your creditors where a debt-management company negotiates reduced offers of repayment on your behalf. It is not legally binding. This means that creditors do not have to accept the offers that are made or freeze interest and charges. However, the debt-management company will do their best to get the creditors to agree to freeze interest. In the same way, if you negotiate reduced offers of repayment yourself, your creditors do not have to accept them or freeze interest. However, they may be more likely to do this through a debt management plan as it shows that you have received advice about your situation.

What can I do if I have a complaint about my debt-management plan (DMP) provider?

The Financial Conduct Authority has produced rules and guidelines that all debt-management plan (DMP) providers should follow. You can refer to these when you make your complaint. As a first step, send your complaint in writing to your DMP provider. If you are not happy with their response, you could check whether they belong to the Debt Managers Standards Association (DEMSA). This is a trade association for certain DMP providers. It has a code of conduct and a complaints procedure. Alternatively, you could complain to the Financial Ombudsman Service. Some debt management companies follow the Debt Management Plan Protocol. This is a set of guidelines that say how DMPs should be set up and run. This may help you with your complaint.

Can my energy supplier disconnect me?

If you don't pay your energy bill, your supplier should only disconnect you as a last resort. They must give you notice first. They cannot cut off your supply unless they have first offered you a range of payment methods to help you pay. It is important to contact them as soon as you know you are going to have problems paying your bill. Treat gas and electricity arrears as priority debts. We have further guidance on how to complete a budget summary to help you negotiate with your energy supplier and try to avoid being disconnected. There may also be a charitable trust fund that can give you extra help.

What is a full and final settlement offer?

When you ask the creditors to let you pay a lump-sum instead of the full balance you owe on the debt, it is known as a 'full and final settlement offer'. In return for having a lump-sum payment, the creditor agrees to write off the rest of the debt.

How should I negotiate a full and final settlement offer with my creditor?

Ask your creditor to accept a full and final settlement offer in writing, not over the phone. Keep copies of any letters that you send to them. We have a sample letter that may help you. If your creditor refuses the offer, you can ask them to reconsider. There are important things to ask for when you make a full and final settlement offer.

How can I complain about my creditor under a hire-purchase agreement?

You can complain to the Financial Ombudsman Service about how a lender or debt collection agency has behaved when dealing with your account. You will have to follow the lender’s complaints procedure first. Your lender or the debt collection agency may also be a member of a trade association. The trade association may have a code of practice and a complaints procedure.

How should I contact my creditors?

It is usually best to contact your creditors in writing. It is a good idea to keep a copy of any letters you send to your creditors and to get a certificate of posting from the post office. If your creditors contact you by phone, explain that you are taking advice from National Debtline and will only be communicating with them in writing. If your creditors do not respect your wishes, consider making a complaint. We have sample letters that can help you.

What should I do if a creditor rejects my offer of payment?

Look at how you have made your offer. We can advise you on how to negotiate effectively with your creditors using a budget summary of income and outgoings. This gives you the best chance of your offers being accepted. Also, start making the payments that you have offered straight away. Stick to your guns. National Debtline has further sample letters that you can use if your first offer is rejected. Explain that your offer is all that you can afford based on your current circumstances.

My bank keeps taking money from my account to clear a non-priority debt - what should I do?

If you are struggling to pay your non-priority creditors, your bank may use any income that comes into your account to pay towards any debts you have with them. This is known as their 'right of set off'. The Financial Conduct Authority's Banking: Conduct of Business sourcebook (BCOBS) contains guidelines about how creditors should use this right. If they do not follow these guidelines, you could make a complaint. You should also consider opening a new bank account which is separate from all your debts to get your income paid into. Once your income is being paid into this new account, cancel any old direct debits and standing orders on your old account. Only transfer direct debits and standing orders for essential bills to the new account. We have a list of basic bank accounts that do not offer any credit facilities.

If I make an arrangement with my lender, can they still send me a default notice?

The terms and conditions of any agreement you take out should explain your rights and duties. If you do not keep to your duties, for example if you fall behind with payments, your lender can send you a default notice. They can do this even if you make an arrangement to pay the debt back in smaller instalments. The default notice should explain how you have broken the agreement and what you need to do to put it right. Your creditor can also mark your credit reference file to show your payment history. This may make it more difficult to get credit in the future.

When I make a reduced offer of payment to my creditor, do they have to accept it?

No. However, we can provide further information about how to negotiate if your first offer is refused. Also, there are some extra guidelines that describe how creditors should treat you. These guidelines apply to many types of debt that you will deal with, such as bank loans, credit cards and overdrafts.

How can I complain about my council?

If you are not happy with the way your council has behaved, the first step is to complain to them directly. Each council will have their own complaints procedure, so contact your council and ask them how to make a complaint. There may be more than one stage to follow. In England if you are still not happy with their final response, consider taking your complaint to the Local Government Ombudsman (LGO). In Wales, consider taking your complaint to the Public Service Ombudsman (PSO) for Wales. The LGO and PSO are independent organisations that can investigate complaints and tell the council to put things right. They are not able to look at all types of complaint.

I disagree with what the council says I owe. What can I do?

The first step is to raise your dispute with the council. Ask them for a breakdown of what you owe, and keep receipts from any payments you have made. If you don't think you should have to pay the bill, provide the council with any evidence you can, for example, proof that you are a full-time student. Depending on why you are disputing the bill, you may need to get advice on your liability or about Council Tax Reduction. Contact us for advice.

Apart from bailiffs, what other types of action can the council take against me?

Council tax is a priority debt because councils have strong powers to try and make you pay. These methods include applying to have money taken straight out of your wages or benefits, making you bankrupt, securing the debt on your home or, as a last resort, asking the court to commit you to prison. If you have council tax debt, get advice as soon as possible.

My friend or relative is struggling with debts. What can I do to help?

Reassure them that we can give free, independent and confidential advice on the options available to them. We provide a range of self-help materials, including fact sheets and a self-help pack, that back up the advice we give. Our clients can call our helpline as many times as they like for further advice. Where our clients give us permission, we keep fully confidential records of each call so that they do not have to repeat information about their circumstances on each new call. If your friend or relative prefers not to speak to someone at this stage, they may find our online debt advice tool, My Money Steps, helpful. My Money Steps is secure and confidential. If your friend or relative would like to use My Money Steps, they will need to enter some details about their circumstances, including their income and expenditure. My Money Steps can help them to work out a budget and give them personalised advice about what options they might want to consider to help them deal with their debts.

Should I use my pension to pay my debts?

Since April 2015, if you are 55 or over, you may be able to take money from your pension fund to pay your debts. Creditors shouldn’t pressurise you to do this. Taking money from your pension fund early can have a big effect on your financial future. You may also have to pay tax on some of the money that you take. Your entitlement to benefits could change, both now and in the future. If you are thinking about taking money from your pension, contact us for advice.

Will I be liable for my spouse's debts if they die?

When someone dies, debts are recoverable from any assets or money left behind. This is known as the ‘estate’. No one else has to pay for the debts unless they are already liable under the terms of the original agreement, for example the debt is in joint names or someone has signed as a guarantor. Dealing with an estate can be complicated. There may be things that you need to know about the property and certain bills that your spouse may have left behind. You may need legal advice.

Debt types

I am a catalogue agent and my customer hasn't paid - am I still liable?

When you act as an agent for the catalogue company and sell goods, or collect money for the company, you need to be careful. You should create a separate account for each of your customers. If you do not do this, then the catalogue company may hold you responsible for any payments missed by your customers. As long as you set up separate accounts, you (as an agent), should not be held personally liable for your customers’ missed payments.

Is my catalogue agreement the same as a hire purchase agreement?

A catalogue agreement involves buying goods from a catalogue company (the creditor). You own the goods as soon as you buy them. You will then pay the creditor for them on the terms that you have agreed. The goods cannot be taken from you, even if you fall behind with payments. This is different to a hire-purchase (HP) agreement. Under a HP agreement, you do not own the goods until you make the final payment. If you fall behind with payments, the creditor may take action to get the HP goods back from you. For these reasons, a HP agreement is usually treated as a priority debt, whereas a catalogue agreement is normally treated as a non-priority debt.

Is there any extra help I can get with my energy bills?

Some energy companies have set up trust funds that may be able to help you pay your energy bills if you are in financial difficulties. Some trust funds may also help you with other essential household bills if you are struggling to pay them. Each scheme has its own rules about who can apply and how this is done.

Can I get help with making my home more energy efficient?

Making your home more energy efficient means that less of the energy you use is wasted. This should help to keep your bills as low as possible. You might switch to a cheaper tariff or apply for a grant from your local council, depending on the benefits you receive and your age. There may be other types of help you can get, such as grants for home improvements. Contact us for advice.

What are the options for repaying my energy debt?

Your supplier should consider a number of different options for you to repay your energy arrears. These include paying the arrears by instalments, a budget plan, through a pre-payment meter or directly from your benefits.

Can I still be chased for an energy debt on my previous home?

Yes. Whenever you move home, it is a good idea to take final meter readings and give them to your energy supplier. This helps to make sure that your final bill is accurate. If you have the same supplier at your new address, the balance of your account may be carried over to your new account. Any arrears should be treated as a priority debt because if you do not pay them off, your supplier could disconnect your new supply as a last resort. If you have a different supplier at your new address, the bill from your previous home can be treated as a non-priority debt. This is because your current supply cannot be cut off for not paying your old bill.

If I fall behind with my payments on a hire-purchase agreement, can I return the vehicle?

The law gives you the right to end a hire-purchase agreement and return the vehicle. However, this right can be lost in certain circumstances, such as if the creditor has already ended the agreement or the full balance of the agreement has become payable. If you fall behind with payments and your lender sends you a default notice and the time limit stated on it runs out (usually 14 days), the agreement may have already ended. If so, you will not be able to end the agreement and give the vehicle back. If you still have the right to end the agreement, do this in writing.

If I fall behind with my payments on a hire-purchase agreement, can they repossess my vehicle?

When you have missed two payments, your lender should send you an 'arrears notice'. If you don't clear the arrears, you lender may also send you a default notice. Once they have done this, the lender can take steps to get your vehicle back. Your rights depend on how much of the total agreement price you have paid.

How do I know if my agreement is hire purchase?

Under a hire-purchase agreement, you do not own the item until you make the final payment. This is different to a credit-sale agreement, where you own the item straight away and then pay back the money you owe over a certain period of time. If you are not sure whether you agreement is hire purchase, check the paperwork you signed. If it’s a hire-purchase agreement, it should have the words ‘Hire purchase’ near the top of the first page. If you don’t have a copy of the agreement, we have a sample letter that you can use to request one for a small fee.

Will I still owe money if I give my hire-purchase vehicle back and how much will this be?

There can be a difference in the amount you end up owing depending upon how the agreement is ended. If you end your agreement and hand back the goods to the creditor, you should only have to pay up to half of the total amount payable under the agreement, minus sums that you have paid and sums that are due. Where a creditor terminates an agreement and repossesses the hire purchase goods, you will usually have to pay the full amount owed on the original agreement, minus what you have paid and minus the amount the creditor gets back from selling the goods.

What's the difference between hire purchase and conditional sale?

Under a hire-purchase agreement, you have a choice about whether ownership of the item passes to you once the final payment is made. However, under a conditional-sale agreement, the ownership of the item automatically passes to you when you make the final payment.

Can I sell my hire-purchase vehicle?

You cannot sell the goods yourself without the creditor’s written permission. If you sell the goods without permission it can be a criminal offence.

I have bought an electrical item on credit from a shop. Does this mean I have a hire-purchase agreement?

Electrical items bought on credit from shops are usually based on a ‘credit sale’ agreement. This means that you own the item as soon as you take the agreement out, even if you fall behind with payments under the agreement. Hire-purchase agreements are different. Under a hire purchase agreement, you cannot own the item until you make the final payment. If you fall behind with your repayments, your creditor can take steps to repossess the goods. Look at your agreement to check whether it is credit sale or hire purchase.

If I do not pay my water bill, can I be disconnected from my home supply?

No. Water companies cannot disconnect you from your supply, even if you are in arrears. This means that you can treat water arrears as a non-priority debt.

Can I go to prison for not paying my council tax bill?

Unlike most other debts, it is possible to go to prison for non-payment of council tax. However, it is very unlikely. Prison is a last resort for councils, and getting advice about your arrears should usually mean the situation never gets that far. You can only be sent to prison if the council can prove that you have 'wilfully refused' or 'culpably neglected' to pay. This is why it is very important to get advice and keep in touch with the council so they know you are trying to resolve the situation.